Three Federal Reserve <a soon" to prevent higher prices from becoming permanent.
“I judge that additional firming of monetary policy will be necessary, and soon,” Musalem said in a speech in New York.
He noted that implementing hikes now would likely cause less economic damage than waiting until inflation becomes deeply entrenched.
“Incremental adjustments made earlier are usually less disruptive than larger and abrupt actions taken later,” said Musalem. “Moving sooner in smaller steps while inflation expectations are anchored has a better chance of succeeding without adverse impact on the labor market or economic growth.”
In a separate address in North Carolina on Friday, Dallas Fed President Lorie Logan reaffirmed her stance that the Fed should carry out at least two more 25-basis-point <a I currently estimate that the fed funds target range is at least 50 basis points — half a percentage point — below the level that would create some modest restriction and begin to bring the inflation trend back to target," Logan said.
She remains a proponent of a measured, gradual strategy.
“Adjusting policy more gradually can help households, businesses and market participants adapt to higher rates and reduce the risk that economic activity deteriorates more sharply than necessary,” Logan said.
Meanwhile, Richmond Fed President Tom Barkin also suggested that the central bank must continue raising rates to combat inflation fueled by strong demand, though he noted that the primary debate centers on the pace of those increases.
“What you see is inflation’s high, demand’s solid, unemployment’s relatively low, and so I think the direction of travel is pretty straightforward,” Barkin said in an interview with SiriusXM Business Radio. “I think the question though is pace.”
Barkin pointed out that Fed leadership has already signaled a preference for a gradual approach to tightening policy.
“Gradual makes sense when you’re not much behind the curve where you want time to learn, both from the economic environment and the external environment, and so we haven’t seen much change since then,” he said. “We’ll see what we learn over the next period of time.”
The Fed opted to keep rates steady in a split decision this week, even as inflationary pressures have intensified. A day later, the Fed’s preferred inflation metric indicated that prices accelerated in September, reinforcing expectations for a rate hike in December. The Personal Consumption Expenditures index climbed 3.6%, up from 3.4% the previous month. Core PCE, which excludes volatile food and energy costs, rose 3.1%, an increase of one-tenth of a percentage point from August’s 3%. On a month-over-month basis, core PCE reached 0.3%, matching forecasts but representing a faster rate of growth than the 0.2% recorded in August.
